2026-08-08 22:02:33
Welcome to the Saturday PRO edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
💊 Eli Lilly: Volume Crushes Price
🦠 Merck: The Bridge Broadens
🧬 Amgen: Growth Outruns the Cliff
🇩🇰 Novo Nordisk: Pill Holds Up
💉 Pfizer: Pipeline Questions
🌐 Arista Networks: Supply Catches Up
💾 Sandisk: AI Eats NAND
☁️ Cloudflare: Agentic Acceleration
🌊 DigitalOcean: AI Accelerates
🐶 Datadog: AI Concentration Bites
☁️ Atlassian: Enterprise Breakout
📢 HubSpot: Pricing Pivot Bites
🎨 Figma: AI Credits Scale
🏴 Klaviyo: Agents Gain Traction
💬 Twilio: Expansion Returns
💻 Paycom: Margins Do the Work
⚡️ Axon: Dedrone Breaks Out
🤝 MercadoLibre: Brazil Bet Pays Off
🥡 DoorDash: DashPass Takes Over
🇰🇷 Coupang: Customers Return
🥕 Instacart: Customers Come Back
📦 Etsy: Back to Etsy
🍞 Toast: Locations Reaccelerate
🔲 Block: Square Catches Up
💳 Fiserv: Reset Gets Deeper
🪙 Circle: Arc Hits the P&L
🏠 Zillow: Growth Without Traffic
🏝️ Booking: Travel Holds Up
🛖 Airbnb: Hotels Check In
🏨 Marriott: US Momentum Holds
✈️ Expedia: Consumer Catches Up
📱 AppLovin: Model Timing Miss
📺 The Trade Desk: Growth Stalls
📌 Pinterest: Growth Speed Bump
👻 Snap: Reset Starts Working
🎧 Spotify: 300 Million Paid
🔥 Match Group: Tinder Stabilizes
🦉 Duolingo: Streak Revival
🗞️ NYT: Subscriber Growth Slows
🚲 Peloton: Profit Without Growth
🎮 Sony: Beyond PlayStation
🎮 Take-Two: GTA VI Preorders Explode
📺 Fox: World Cup Windfall
🏈 Flutter: FanDuel Needs a Reset
👑 DraftKings: Predictions Get Expensive
🍟 McDonald’s: Value Misfires
🍔 RBI: Burger King Breaks Out
🌭 Kraft Heinz: Green Shoots
⚡️ Celsius: Alani Carries the Portfolio
Lilly’s Q2 revenue jumped 48% Y/Y to $23.0 billion ($2.3 billion beat), while adjusted EPS was $8.38 ($1.80 beat). Revenue growth came from a 60% increase in volume, more than offsetting a 13% decline in realized prices.
Mounjaro surged 91% to $9.9 billion and Zepbound grew 46% to $4.9 billion, bringing combined GLP-1 revenue to nearly $15 billion. International Mounjaro sales more than doubled to $5.2 billion as Lilly expands access globally, despite significant price reductions including China reimbursement.
Foundayo, Lilly’s newly launched oral GLP-1 obesity pill, generated $98 million in its first quarter on the market. The next-generation pipeline also advanced materially: retatrutide (triple-hormone obesity injection targeting GLP-1, GIP, and glucagon) delivered positive results in three additional Phase 3 obesity trials. Lilly plans to file with the FDA in Q1 2027.
Lilly raised FY26 revenue guidance to $85–$87 billion, a $2.5 billion midpoint increase. Underlying EPS guidance was also raised by $2.78 at the midpoint, but $3.03 of acquisition-related R&D charges offset that improvement, leaving reported guidance at $35.50–$36.50.
Bottom Line: The GLP-1 story remains a volume machine. Lilly is deliberately giving up price to expand access, and demand is more than compensating. Foundayo adds a new format today, while retatrutide increasingly looks like the next major leg of the obesity franchise.
2026-08-07 20:03:44
Welcome to the Free edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
This week, we’re visualizing more than 50 earnings reports across tech, healthcare, commerce, and everything in between.
Today at a glance:
🚖 Uber: AV Anxiety
🍄 Nintendo: Software Cushion
🛍️ Shopify: Deceleration Dodged
Uber’s Q2 revenue rose 12% Y/Y to $14.2 billion ($70 million miss), though an accounting shift from a merchant to an agency model in UK Mobility reduced reported growth by 8 points.
Gross Bookings grew 24% (or 22% constant currency) to a record $58.0 billion, marking the fourth consecutive quarter above 20%.
Trips rose 18% to 3.9 billion, driven by 16% growth in monthly users. The 2-point slowdown in trip growth came entirely from Brazil, Uber’s highest-volume market, where competition for two-wheel drivers constrained supply. US Mobility actually accelerated as insurance savings funded lower prices, with trip growth strongest in markets like San Francisco and Los Angeles where fares fell the most.
Mobility bookings grew 20%, while Delivery accelerated to 25%. That growth is increasingly flowing through to profits. Adjusted EBITDA rose 33% to $2.8 billion, with margin reaching 4.9% of Gross Bookings. Trailing-12-month free cash flow crossed $10 billion for the first time, giving Uber more room for buybacks, M&A, and AV investment.
Autonomy remains the valuation debate. Uber is now live with AVs in seven cities and still targets 15 by year-end. Management argues its advantage is not building the autonomous driver itself, but aggregating demand, dispatching vehicles, handling fleet operations, insurance, and regulators. In mature AV markets including San Francisco, Los Angeles, and Phoenix, Uber says its overall category share is actually higher than a year ago.'
Yet the valuation already reflects plenty of AV anxiety. At roughly 10x 2027 adjusted EBITDA, Uber trades at a modest multiple for a business still growing bookings above 20%. The market is clearly pricing in some future erosion of Uber’s economics.
Uber guided Q3 Gross Bookings to $58.25–$60.25 billion, implying 18–22% constant-currency growth, while EPS guidance of $0.84–$0.88 was roughly in line.
Bottom Line: Uber’s core business keeps getting stronger and its Delivery Hero acquisition could deepen its flywheel. The market’s question has simply moved further out: how much of today’s economics does Uber retain once robotaxis scale?
Nintendo Q1 revenue (June quarter) fell 10% Y/Y to ¥518 billion (~$3.3 billion), but still beat expectations, while operating profit surged 151% to ¥143 billion, nearly double consensus. Net income rose 54% to ¥147 billion. The catch was that roughly $300 million of refunded US tariffs reduced cost of sales, providing a large one-time boost to profitability.
Switch 2 sold 3.8 million consoles, down 34% against last year’s launch quarter but already 23% of Nintendo’s 16.5 million FY27 target. It now has an installed base of 23.7 million units globally. That compares to 17.8 million units sold by the original Switch a year after launch.
The big surprise was that the original Switch software sales jumped 39% to 34 million units, versus just 9.5 million Switch 2 games. Tomodachi Life: Living the Dream sold 7.9 million units and Pokémon Pokopia 1.3 million, showing that backward compatibility is keeping the 150M+ Switch ecosystem economically relevant even as hardware migrates. Digital sales nearly doubled to ¥133 billion and reached 62% of software revenue.
IP-related revenue more than doubled to ¥35 billion, helped by The Super Mario Galaxy Movie, which has already passed $1 billion at the global box office. That higher-margin software and IP mix helped gross margin jump 22 points to 54%, although the tariff refund materially amplified the improvement.
Bottom Line: Nintendo left FY27 guidance unchanged at 16.5 million Switch 2 consoles, 60 million Switch 2 games, ¥2.05 trillion of revenue, and ¥370 billion of operating profit. The real test still starts in September, when a price hike takes the Switch 2 to $500 heading into the holiday season.
Shopify’s Q2 revenue jumped 34% Y/Y to $3.6 billion ($140 million beat), while GMV grew 32% to $115.6 billion. Free cash flow reached $654 million at an 18% margin, up from 15% last quarter. Shares surged as the recent deceleration scare proved premature.
Growth remained broad across merchant sizes, geographies, and channels. Shopify Payments penetration reached 68% of GMV (+3pp Y/Y), while Shop Pay has now processed more than $400 billion in GMV since launch.
AI commerce is also becoming more tangible. AI-driven traffic and orders to Shopify stores both tripled Y/Y, with AI-attributed orders converting at roughly twice the rate when agents use Shopify’s structured Catalog rather than scraped web data. Importantly, 75% of AI-attributed orders came from outside Shopify’s top 100 categories, suggesting AI discovery disproportionately benefits smaller merchants.
Shopify guided Q3 revenue growth to the low-30s%, well above the ~27% consensus and implying a sixth consecutive quarter above 30%. Free cash flow margin should also improve to the ‘high teens’ to ‘low 20s.’
Bottom Line: Q1 raised the question of whether Shopify was finally slowing. Q2 answered it decisively. GMV and revenue remain above 30%, margins are expanding, and AI is increasingly looking like a distribution tailwind rather than the disruption risk investors feared.
Next up: Saturday’s massive PRO edition, with over 40 companies visualized, including Eli Lilly, AppLovin, Sony, Airbnb, Spotify, and more.
That’s it for today!
Stay healthy and invest on!
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Start an account for free and save 15% on paid plans with this link.
Disclosure: I am long SHOP and UBER in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2026-08-05 06:51:05
Welcome to the Premium edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
This week, we’ll visualize more than 50 reports ranging from Airbnb to Zillow.
Today’s batch captures the mood of earnings season pretty well, with huge AI ambition, rising capital intensity, and a few quieter stories improving underneath.
Today at a glance:
🕵️ Palantir: Sovereign AI
🚀 SpaceX: Growth Meets the Bill
↗️ AMD: Data Center Takes Over
🛵 Grab: The Overhang Shrinks
Palantir Q2 revenue jumped 93% Y/Y to $1.94 billion ($130 million beat), marking the 12th consecutive quarter of acceleration. Adjusted EPS of $0.41 beat by $0.06. The Rule of 40 score climbed again to 155, with adjusted free cash flow reaching $1.22 billion at a 63% margin.
US revenue keeps pulling away.
💼 US Commercial: $764 million (+149% Y/Y, +28% Q/Q).
🪖 US Government: $809 million (+90% Y/Y, +18% Q/Q).
Total US revenue reached $1.57 billion, up 115% Y/Y and now representing 81% of Palantir’s business. International revenue grew a much slower 33% to $363 million, with CEO Alex Karp again dismissive of Europe: “The growth sucks.”
The pipeline behind the print looks even more bullish. Palantir closed 220 deals worth at least $1 million, including 73 above $10 million.
TCV (Total Contract Value): The total value of contracts signed during the quarter reached a record $2.13 billion in US Commercial, up 153% Y/Y.
RDV (Remaining Deal Value): Contracted revenue not yet recognized climbed 124% Y/Y (and a staggering 27% Q/Q) to $6.24 billion in US Commercial, giving Palantir an increasingly large backlog behind future growth.
Palantir’s new framing is “sovereign AI.” Management argues customers increasingly want AI without handing proprietary data, workflows, or competitive intelligence to frontier model providers. AIP (Palantir’s AI Platform) sits between companies and the models, letting customers swap LLMs while keeping their data and operational logic under their own control. Karp put it more bluntly: customers should not become “vassal states of the language labs.”
We discussed last quarter that tokens are the new coal. Models and tokens are becoming cheaper commodities. Palantir wants to own the governed operational layer where companies turn them into actual work.
Palantir raised FY26 revenue guidance by roughly $500 million to $8.15–$8.16 billion, implying 82% growth, versus 71% expected just three months ago. US Commercial is now expected to grow at least 134% to more than $3.42 billion. Adjusted free cash flow guidance increased to ~$4.6 billion (from ~$4.3 billion previously).
Bottom Line: The fundamental story somehow keeps getting stronger. Revenue growth accelerated, US Commercial is now 39% of the top line, and free cash flow margins have crossed 60%. The valuation is still extreme at nearly 80x FY26 EBITDA, but Palantir is doing something equally extreme: accelerating above 90% revenue growth at nearly $8 billion of annual revenue while simultaneously expanding margins.
SpaceX’s first earnings report as a public company showed why investors are excited about the business and why the valuation remains difficult to digest.
2026-08-02 22:01:22
Welcome to the Premium edition of How They Make Money.
🔥 The July report is here!
All the key earnings visuals from the past month in one place.
✔️ Cut through the noise with clear, concise financial snapshots.
✔️ See revenue trends, profit margins, and key takeaways instantly.
Download the full report below or log in to your account.
![Screen Recording 2026-07-31 at 1.11.05 PM.mov [video-to-gif output image]](https://substackcdn.com/image/fetch/%24s_!xi2q!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fc277fa3f-21af-4980-b6d3-2972b35a07a8_800x448.gif "Screen Recording 2026-07-31 at 1.11.05 PM.mov [video-to-gif output image]")
Here’s a sneak peek of the 100+ companies included. 👀
☁️ Mega-Caps: Apple, Alphabet, Microsoft, Amazon, Meta, Tesla.
🧩 Semis: TSMC, ASML, Samsung, SKH, Intel, KLA, Qualcomm.
💊 Healthcare: J&J, UnitedHealth, Abbott, Intuitive Surgical.
🏦 Banks: JPMorgan, BofA, Wells Fargo, Citigroup, Schwab.
🍿 Entertainment: Netflix, Comcast, Roblox, Live Nation.
💰 Wealth: Morgan Stanley, Goldman Sachs, BlackRock.
💻 Software: IBM, SAP, ServiceNow, Fortinet, AppFolio.
☕ Restaurants: Starbucks, Chipotle, Domino’s, YUM!
✈️ Airlines: American, Delta, Southwest, United.
📡 Telecom: AT&T, T-Mobile, Comcast, Verizon.
💳 Payments: Amex, Visa, Mastercard, PayPal.
🛡️ Defense: Boeing, Airbus, Lockheed Martin.
🇫🇷 Luxury: LVMH, Hermès, Kering, L’Oréal.
🧬 Pharma: AbbVie, Sanofi, AstraZeneca.
🔬 Equipment: ASML, Lam Research.
🥤 Beverages: Coca-Cola, PepsiCo.
🚗 Autos: Rivian, GM, Ford, Ferrari.
📈 Brokers: SoFi, Robinhood.
🏨 Travel: Hilton.
Plus Reddit, Mondelez, Hershey, UPS, P&G, GE Vernova, Tilray, and more.
2026-08-01 22:02:56
Welcome to the Saturday PRO edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
📱Apple: Ternus Handoff
🕶️ Meta: AI Bill Comes Due
📱 Samsung: Records Meet A Rout
💳 Visa: Volume Accelerates
💳 Mastercard: The Crack Didn't Widen
⏳ AbbVie: Growth Engines Hold
🧠 Lam Research: The Ramp Steepens
🥤 Coca-Cola: Volume Carries The Quarter
🧴 P&G: Iran Cost Bites
📱 Arm: Data Center Offsets Phones
🔬 KLA: 2027 Gets Bigger
🧬 AstraZeneca: Pipeline On Trial
🛩️ Airbus: The Ramp Finally Shows
📲 Qualcomm: Diversification On Trial
🛩️ Boeing: Cash Turns Positive
☕️ Starbucks: Measurable Momentum
🔒 Fortinet: The Surge Extends
📦 UPS: The Reset Lands
💡 Cadence: AI Demand Compounds
🪶 Robinhood: Firing On All Cylinders
🍪 Mondelez: North America Turns
🏨 Hilton: Mid-Scale Rebounds
🏎️ Ferrari: Scarcity Pays
🚙 Ford: Trucks Cover The Damage
💳 PayPal: The $60 Question
📈 Coinbase: Winning a Smaller Market
🎤 Live Nation: World Tour Expands
🌯 Chipotle: Momentum Meets A Wobble
🌮 Yum! Brands: Pizza Hut Heads Out
🍫 Hershey: Price Over Volume
👾 Roblox: Monetization Trade-Off
👽 Reddit: Monetization Outruns Users
⚡ Rivian: R2 Hits the Road
🏦 SoFi: Records Meet A Shrug
🦷 Align: Scanners Down
🩺 Teladoc: The BetterHelp Pivot
Apple’s Q3 revenue rose 16% Y/Y to $109.4 billion ($0.5 billion beat), while EPS reached $2.02 ($0.13 beat). Tariff refunds contributed $0.11 to EPS, but underlying results still came in ahead of expectations. These were June quarter records, yet shares fell about 6% after earnings.
iPhone revenue grew 22% to a record $54.3 billion.
Mac jumped 29% to a record $10.4 billion.
China rebounded 22% to $18.8 billion.
Services slowed to 12% growth, reaching $30.7 billion.
This was Tim Cook’s final earnings call before John Ternus takes over in September. He leaves Apple with a good problem to have: the company cannot make enough devices.
Cook said unexpectedly strong iPhone and Mac demand exhausted Apple’s flexibility to secure more advanced chips. These constraints primarily affected Mac this quarter and will broaden to iPhone, Mac, and iPad in the September quarter. Apple still guided revenue growth to 9%–11%, with iPhone expected to grow in the mid-teens, but the outlook came in below consensus.
Memory is becoming the larger margin problem. Cook described the market as a “hundred-year flood,” with rapidly rising prices already forcing Apple to increase some Mac and iPad prices. Excluding tariff benefits, gross margin declined sequentially, and Apple expects another step down in Q4 as cheaper inventory runs out.
Meanwhile, R&D spending rose 32% Y/Y to $11.7 billion as Apple accelerated its AI investment. Cook also suggested heavy Siri users could eventually be pushed toward more expensive iCloud+ plans, offering an early glimpse of how Apple might monetize its AI overhaul.
Ternus inherits one of Apple’s strongest product cycles in years, but also a supply chain that cannot fully support it and a margin structure increasingly exposed to memory inflation. The next iPhone cycle must prove Apple can manage both pressures while convincing customers that its AI catch-up is finally real.
Meta’s Q2 revenue rose 28% Y/Y to $60.8 billion ($0.5 billion beat). GAAP EPS fell 13% to $6.18, but the quarter included $2.4 billion in legal charges related to youth-safety litigation and $1.2 billion in severance costs. Excluding those items, operating income would have risen 9% rather than declined 8%. Despite the underlying beat, shares fell as much as 10%.
The selloff came down to two things:
Free cash flow nearly disappeared. Meta generated $31.9 billion in operating cash flow but spent $31.1 billion on capex and finance leases, leaving just $784 million in free cash flow, down 91% Y/Y. It also issued $24.9 billion of debt and repurchased no stock. Meta can afford the buildout. But for the first time, AI spending has effectively consumed the quarter’s free cash flow, halted buybacks, and pushed the company into the debt market.
The CapEx floor moved higher again. Meta narrowed its FY26 outlook to $130–$145 billion from $125–$145 billion, raising the bottom end for the second consecutive quarter. Its new 1 GW El Paso data center venture shows how it plans to fund the next stage: BlackRock will own 80%, while Meta retains 20% and leases the entire campus. The structure reduces the upfront cash burden without reducing Meta’s long-term commitment.
The irony is that AI is already paying off inside the ad business. Advertising revenue grew 27% Y/Y as impressions increased 14% and average price per ad rose 12%. Meta’s latest models generated an 8% increase in ad clicks and a 16% uplift in Facebook conversions, while Advantage+ products surpassed a $75 billion annual revenue run rate. AI is already producing measurable returns inside the existing business.
Family DAP reached 3.60 billion, Instagram crossed two billion daily users, and Threads surpassed 500 million monthly users. WhatsApp paid messaging and subscriptions also pushed Family of Apps ‘other’ revenue above $1 billion for the first time.
Zuck also offered a more concrete return path than last quarter. Beyond improving ads and engagement, Meta may sell paid model access and lease excess computing capacity. He said outside buyers have offered a “meaningful premium” to Meta’s cost, though building a real cloud business will require distribution and software capabilities Meta does not yet have.
Reality Labs lost another $4.6 billion, while revenue rose 16% on stronger AI-glasses sales.
Meta guided Q3 revenue to $61–$64 billion, with the midpoint below consensus, and raised FY26 expenses to $165–$169 billion. Meta is already earning more from ads, and it now has plausible ways to monetize models and excess compute. The problem is that the spending is arriving all at once, while some of the new revenue streams will take time to meaningfully contribute.
2026-07-31 20:00:43
Welcome to the Free edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
Amazon plans to spend $220 billion in CapEx this year, up another $20 billion.
And it still won’t be enough. CEO Andy Jassy explained:
“Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026. […] I believe this dynamic will also be true in 2027, too.”
AWS growth accelerated for the fifth consecutive quarter, backlog reached $496 billion, and margins expanded despite the unprecedented buildout.
Amazon has been building the stack for agentic AI. Now, the bet is moving from architecture to economics. Demand is arriving faster than capacity, and Jassy is increasingly confident the returns will justify the spend.
Now let’s see what stood out this quarter.
Today at a glance:
Amazon Q2 FY26.
The economics of the AI stack.
Key quotes from the call.
What to watch moving forward.
Revenue rose +20% Y/Y to $200.6 billion ($4.2 billion beat).
Gross margin was 52% (+0pp Y/Y).
Operating margin was 14% (+2pp Y/Y).
AWS: 39% margin (+6pp Y/Y).
North America: 8% margin (+0pp Y/Y).
International: 4% margin (+0pp Y/Y).
Net profit included a $53.4 billion non-operating gain, primarily from the valuation markup of Anthropic. The markup followed Anthropic’s $65 billion Series H round in May at a $965 billion valuation, up from $380 billion in February.
Operating cash flow TTM was $161.4 billion (+33% Y/Y).
Free cash flow TTM fell to negative $7.6 billion as a 64% rise in CapEx to $169.0 billion more than offset the growth in operating cash flow.
Cash, cash equivalents, and marketable securities: $123 billion.
Long-term debt: $129 billion.
Revenue +9% to 12% Y/Y.
Operating income of ~$24.5 billion, or +40% Y/Y at the midpoint.
☁️ AWS breaks out: AWS revenue accelerated 37% Y/Y to $42.2 billion, its fastest growth in 18 quarters. AWS operating margin reached 39%. Excluding a $600 million energy-contract accounting gain, it still expanded 520 basis points Y/Y. Meanwhile, Amazon’s AI and custom-chip businesses each surpassed $25 billion annual revenue run rates, both growing triple digits. The chips business was above $20 billion just three months ago. At this scale, accelerating growth and expanding margins at the same time is the quarter’s defining result.
💵 The AI bill is getting larger: Free cash flow swung to a $7.6 billion outflow as CapEx reached $169 billion over the past year. Amazon also raised its 2026 CapEx forecast from $200 billion to $220 billion, primarily because of higher memory costs. Capital spending now exceeds the cash Amazon generates from operations.
📦 Retail volume remains strong: North America revenue grew 16%, International grew 15%, and worldwide paid units increased 17%. North America margin was flat even with a $600 million tariff refund, as higher fuel and transportation costs offset continued fulfillment efficiencies.
📢 Advertising keeps climbing: Revenue grew 26% Y/Y to $19.8 billion, putting the business near an $80 billion annual run rate. Sponsored Products remains the core engine, while Prime Video and live sports are opening new inventory.
🔮 Guidance looks softer than the underlying business: Q3 revenue growth is expected to slow to 9%–12%, but the shift of Prime Day into Q2 reduces the reported growth rate by nearly four percentage points, while foreign exchange creates another 80-basis-point headwind. Operating income is still expected to grow roughly 40% at the midpoint, suggesting Amazon’s margin expansion remains intact.
Jassy finally laid out the math behind Amazon’s massive CapEx ramp.
The spending falls into two different buckets:
Servers and networking equipment: Purchased only a few months before deployment, when Amazon already has visibility into demand. They typically break even in less than three years, while most AI capacity is contracted for at least five.
Data centers: Built roughly two years before monetization, but designed to operate for more than 30 years and support five or six generations of servers.
Most of AWS’s 2027 capacity is already reserved, with meaningful commitments extending into 2028.
The near-term free cash flow pressure is unavoidable, but Amazon is not building on speculation. Much of the equipment is backed by long-term contracts, while the data centers can generate revenue long after the first generation of servers is retired.
AWS is also expanding beyond infrastructure into the software agents running on top of it. Bedrock customers spent more in Q2 than in all previous quarters combined.
Bedrock AgentCore added payments, web search, deterministic controls, and a development harness.
Amazon Quick can now run autonomous workflows across email, calendars, files, and third-party applications.
Kiro, Amazon’s coding agent, tripled usage sequentially.
Continuum uses agents to identify, validate, and remediate software vulnerabilities.
AI is also pulling the core cloud business with it, since post-training and agent tool use rely heavily on CPUs. Trainium and Graviton lower the cost underneath, Bedrock sits at the model and agent layer, and applications such as Quick, Kiro, and Continuum move AWS closer to the end user.
Check out the earnings call transcript on Fiscal.ai here.
“We see the margins and returns in AI tracking what we saw with Core at the same point of evolution, actually a little ahead.”
This directly challenges the assumption that AI workloads will structurally dilute cloud margins. Amazon believes AI economics are developing faster than AWS did in its early years.
“In the middle of the barbell is all of the current enterprise production workloads, some of which are using inference in a pervasive way, but most of which aren't. That is going to change very significantly over time. In my opinion, that will be the largest absolute segment […].”
AI demand is currently barbelled between frontier labs and breakout applications on one side, and narrow enterprise use cases on the other. Jassy believes the middle will eventually become the largest segment: AI embedded across existing production workloads.
“My view of it is that within the next few years, you're going to have at least a half dozen models that are comparably good to each other. [...] They'll all be in Bedrock, one of them will be ours.”
Amazon does not need its model to dominate. Bedrock wins through choice, while an in-house frontier model gives Amazon more control over cost, speed, and product priorities.
Total cloud infrastructure spending surged 43% Y/Y to $143 billion in Q2, the 11th consecutive quarter of accelerating growth and the fastest pace in eight years. The market has doubled over that period, with GenAI-specific cloud services growing 165% Y/Y, according to Synergy Research Group.
AWS maintained its leading 28% market share, compared to 20% for Microsoft Azure and 15% for Google Cloud. The three platforms now control 63% of the overall cloud infrastructure market, and 67% of public IaaS and PaaS spending.
All hyperscalers remain supply-constrained, so small quarter-to-quarter market-share movements should not be overanalyzed. The bigger story is a broad AI-driven reacceleration. Microsoft and Google are still growing faster, but AWS has held its 28% share while accelerating from a much larger revenue base.
Amazon is exploring selling Trainium chips separately to customers operating their own data centers. That could turn Trainium from an AWS-exclusive advantage into a merchant-chip business, expanding Amazon’s addressable market beyond the cloud.
The trade-off is whether selling Trainium more broadly weakens one of AWS’s clearest cost and performance advantages.
Amazon now offers same-day perishables in 2,300 US cities. Monthly active perishables customers have increased 50% since the start of the year, while orders containing perishables average three times as many units.
The opportunity extends beyond grocery revenue. Grocery can increase purchase frequency, basket size, delivery density, and advertising inventory at the same time.
In Q2 2026, the leading hyperscalers grew their trailing-12-month operating cash flow by 34% to $660 billion.
That cash engine allowed Big Tech to begin the AI buildout without relying heavily on outside capital. But the scale of investment has now caught up: free cash flow has turned negative at Amazon and Google and fallen close to zero at Meta. The next phase is already pulling more debt into the equation. Amazon issued debt this year and says it will continue evaluating its funding options (in Alphabet’s case, that includes equity issuance).
Amazon argues this is a timing mismatch rather than a deterioration in economics. It is spending years ahead of demand, while the resulting infrastructure could generate revenue for decades. If Jassy is right, today’s free-cash-flow collapse is the price of locking in tomorrow’s capacity. If demand, pricing, or utilization disappoints, that operating leverage works in reverse.
Next up: Saturday’s massive PRO edition, with more than 30 companies visualized.
That’s it for today!
Stay healthy and invest on!
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Start an account for free and save 15% on paid plans with this link.
Disclosure: I am long AMZN, GOOG, META, and MSFT in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.